Baltimore Injury Lawyer Blog
A Maryland appellate court has looked at a nursing home arbitration agreement and found it was unconscionable and unenforceable. This is a big deal and is another step — our firm, Miller & Zois, helped make a big step three years ago — towards eliminating the enforceability of arbitration clauses in nursing home cases.
Rankin v Brinton Woods Quick Summary
After an elderly patient died his estate brought a wrongful death and survival action lawsuit against his nursing home. The nursing home forced the survival action into arbitration by enforcing an ADR clause in the admission contract signed by the patient’s daughter. The Estate appealed arguing that the arbitration clause in the admission contract was not legally enforceable. The Court of Special Appeals (“COSA”) agreed and held that the nursing home arbitration clause was unenforceable based on unconscionability.
Brinton Woods Facts
In 2015 the elderly decedent was put in the defendant’s nursing home facility by his adult children. As part of this process, the decedent’s oldest daughter was required to sign an admission contract (the “Admission Contract”) on behalf of her father. The Admission Contract contained a clause that required mandatory arbitration of any tort claims against the nursing home.
Soon after becoming a resident at the nursing home, the decedent developed serious bedsores and died from the resulting infection. The decedent’s estate blamed his death on negligent care and filed a wrongful death and survival action lawsuit against the nursing home in the Circuit Court for Baltimore City. The nursing home moved to compel arbitration based on the clause in the Admission Contract. The trial judge ruled that the Estate claim (which bringing the survival action in Maryland) must be disposed of in arbitration. He ruled against the nursing home on the wrongful death case (consistent with the holding in our case, FutureCare v. Peeler. So the court placed a stay on the wrongful death claim until the arbitration case was heard. (Talk about judicial inefficiency, right? We are going to arbitrate a case, get a ruling, and then go through the litigation process on the same exact operative facts? No one addressed this issue but that is insanity.)
Issues on Appeal
At issue on appeal was the legal enforceability of the arbitration clause in the Admission Contract. The Estate argued that this clause was invalid for 2 reasons: (1) the decedent’s daughter lacked authority to sign the contract on behalf of her father; and (2) the arbitration clause should be invalid based on unconscionability. The COSA ultimately agreed with both arguments and held that the arbitration clause should not have been enforced.
Agency
The COSA first held that the decedent’s daughter lacked authority to enter into the Admission Contract on her father’s behalf. The Court explained that to enforce the arbitration clause, the nursing home had to show that the daughter was an “authorized agent” of her father, the decedent. In the context of nursing home admission contracts, the Court noted that a written agency directive or power of attorney is NOT required to establish an agency relationship. This is particularly true with adult children signing on behalf of sick, elderly parents.
The Court of Special Appeals did conclude that the adult daughter was acting as her father’s agent. However, the Court found that waiving the decedent’s right to a jury trial went beyond the scope of the daughter’s authority.
Unconscionability
The much more significant part of the COSA’s ruling in this case related to the estate’s unconscionability argument. The estate argued that even if the daughter had authority, the arbitration clause in the Admission Contract was so one-sided that it should be considered unconscionable.
In addressing this issue, the Court began with an overview of Maryland contract law on the defense of unconscionability. To establish an unconscionability defense a party must show (i) procedural unconscionability; and (ii) substantive unconscionability. Procedural unconscionability looks at how the contract was drafted (e.g., deceptive fine print, lack of negotiation, or use of confusing language). Stewart v Stewart, 214 Md. App. 458, 477 (2013). Substantive unconscionability focuses on whether the terms of the contract are overly one-sided or “grossly favorable to the more powerful party.” Id. at 477-78.
The court found that the nursing home Admission Contract was procedurally unconscionable because it was a “contract of adhesion.” A contract of adhesion is one that is unilaterally drafted by the dominant party and presented on a “take-it-or-leave-it” basis with no opportunity to negotiate the terms. The Court held that this is exactly what the Admission Contract was. It was drafted entirely by the nursing home and the decedent (and his daughter) had no real way of negotiating the terms. The court also found that the format of the arbitration clause itself was procedurally unconscionable because it was not emphasized with a bold, underlined or italic font.
The court also had little difficulty finding substantive unconscionability. Specifically, the court noted that the Admission Contract (particularly the arbitration clause) was not only unclear but completely one-sided and overbearing. Moreover, the nursing home (who drafted the contract) would be considered the more sophisticated party in comparison to the patients signing the agreement.
Notes and Comments
This case could have positive implications for the plaintiff’s attorneys fighting for their clients’ right to get their day in court. The COSA’s decision that THIS nursing arbitration clause was unconscionable will make it very difficult for other nursing homes to enforce similar arbitration clauses. The Court’s decision on the issue of unconscionability is very definitive. Plaintiffs’ nursing home lawyers should be able to use this case as an effective weapon to prevent nursing homes from forcing negligence lawsuits into arbitration. This is a big win for victims and a big win for those who do not like the idea of nursing homes being able to sweep killing their residents under the rug.